The Obama administration is taking steps to make the fees charged in 401(k) plans more transparent and broaden the options retirees have for drawing on their nest egg.
The U.S. Treasury Department and Department of Labor each set forth new rules or proposed regulations that apply to 401(k) plans on Thursday.
Treasury's proposed regulations would make it easier for people with 401(k) plans to receive part of their funds as an annuity, a plan that pays out regularly over a lifetime.
Such plans can be useful options because people are living longer and some may end up outliving their savings or, fearful of such an outcome, hold back on spending more than necessary.
"Having the ability to choose from expanded options will help retirees and their families achieve both greater value and security," Treasury Secretary Tim Geithner said in a statement.
Upon retirement, people with savings in a 401(k) plan typically are given the choice to take a lump sum or receive funds as an annuity. The proposed regulations seek to make it simpler for companies to offer employees combinations of an annuity and a single-sum cash payment, and make it easier for retirees to buy so-called longevity annuities. Those start paying out when beneficiaries hit an advance age, say after age 80.
Treasury plans to finalize the regulations by the end of the year.
In addition, Treasury issued rules that apply to employers who offer 401(k) and defined benefit pension plans, which also pay out a set amount over a lifetime.
The rules aim to spell out the steps employers can take to let workers shift funds from their 401(k) accounts to their defined benefit plans, and clarify that employers can offer workers the option to use 401(k) savings to buy deferred annuities and still satisfy guidelines aimed at protecting a beneficiary's spouse.
Both rules went into effect on Thursday.
Labor's rule requires certain firms that run 401(k) and pension plans to disclose investment fees and other costs to employers.
Retirement plan companies will have to disclose direct and indirect compensation that they receive in connection to the services they provide.
Those firms must comply with the rule no later than Aug. 30.
"When businesses that sponsor retirement plans, and the workers who participate in those plans, get better information on associated fees and expenses, they'll be able to shop around and make informed decisions that will lead to cost savings and a larger nest egg at retirement," said Secretary of Labor Hilda L. Solis.
Surprise: Hillary Clinton Went Around Federal Law, Used Her Personal Email Account For Official Business as Secretary of State | Katie Pavlich
House Judiciary Chairman: ATF Attempt to Ban AR-15 Ammo By Executive Order is "Preposterous" | Katie Pavlich
Are We Really Surprised Democrats Who Booed Jerusalem Will Boycott Netanyahu's Speech? | Katie Pavlich